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Analysts split over a tie-up between Reckitt and Colgate

Shares in Reckitt Benckiser were in the spotlight yesterday, with three times the usual daily volume traded, as speculation mounted about a potential multi-million tie-up.<br /><br />Analysts were split as to whether the Cillit Bang maker was eying and merger with Colgate Palmolive, or a potential takeover of Durex maker SSL International. But there was a general agreement that the firm is in prime position to join in the increasing consolidation activity in the household goods sector. <br /><br />Evolution Securities analyst Chas Manso de Zuniga was dubious over the potential for a deal with Colgate, noting that the speculation is not new and that valuation could be a stumbling block. <br /><br />&ldquo;Colgate and Reckitt have similar market capitalisations &ndash; &pound;26bn and &pound;22bn respectively &ndash; so a combination is likely to be a merger of equals. And it&rsquo;s never a merger of equals! Who would have the upper hand?&rdquo; he said.<br /><br />Evolution preferred the idea of Reckitt making a bid for smaller firm SSL.<br /><br />&ldquo;To us this makes a lot of sense as Reckitt could almost double SSL&rsquo;s profits and rip out say &pound;300m of working capital, compared to SSL&rsquo;s market cap of &pound;1.4bn,&rdquo; added Manso de Zuniga.<br /><br />Charles Stanley analyst Tom Gidley-Kitchin said he thought a link up between Reckitt and Colgate is &ldquo;highly unlikely&rdquo;, saying the rationale for working together &ldquo;is not obvious&rdquo;.<br /><br />Reckitt Benckiser shares close up by 1.13 per cent at 3,140p, having gained four per cent earlier in the day.<br />